Why we work with LIXI (pt. 1)
March 15, 2010 by Paul M.. Filed under Friction, Interoperation, Lending industry, Process, Standards.
Anyone who has purchased property, or at least considered it, has at least a basic understanding of the process: You get a loan approval from the bank, do the deal with the real estate agent, sign the loan contract and get your friendly solicitor to manage the conveyancing.
But when you unpack this there is much more complexity here than first meets the eye. Mortgage brokers, aggregators and bank mortgage sales people are all competing for the buyers’ business (because they’re usually chasing commissions, of course). A good broker will collect all of the applicants’ details and make a recommendation about which loan product(s) is/are most suited to each applicant’s circumstances (the cynics among us will suggest this is not always the case), before forwarding the application to the lender, usually a bank. The lender then runs a standard credit check (in Australia this is done almost exclusively through Veda, formerly Baycorp Advantage) who have retained this monopoly for decades).
Assuming this test passes, the lender then gets a valuation done on the property. If the loan amount is a high proportion of the property value (usually 80% or more), they will require mortgage insurance and that means yet another transaction. Assuming a loan application makes it through these steps, it may be ready for settlement, a process involving your conveyancing solicitor, the lender and the seller’s solicitor, sitting in a room together checking the paperwork and signing forms to finalise the transfer of the land title. That last step also requires transactions with the state revenue office (for stamp duty) and the land titles office to keep the relevant records of property ownership up to date.
Simplified loan approval process steps and parties (click to enlarge)
That’s at least nine different, operationally independent parties involved in handling your new property purchase, and clearly a classic example of a business ecosystem. Those with an eye for process efficiency will also recognise at least nine sources of transactional (Type 1) friction, not counting those activities within an organisation that may also be friction-loaded. (This, and the other forms of friction were described in the previous post.)
LIXI is Australia’s business standards organisation for the lending industry. LIXI standards provide the vocabulary for these interactions and also describe the structure of messages used for transactions in processing home loan applications – hence they are concerned directly with reducing friction in the mortgage business.
As a complex, archetypal business ecosystem, the Australian lending industry is therefore an excellent domain for our research to draw its use-inspiration. And as a business enabler concerned with reducing friction, LIXI and its members are obvious partners for us to be teaming with.
Everyone in this space acknowledges there is still an enormous amount of work to be done and plenty of challenges ahead, and some of these challenges will be the topics of future posts. In the next post I’ll describe some of the changes we’ve already seen in the industry and some of the achievements made by LIXI.
Tags: business process, Interoperation, Lending industry, Standards
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